I’ve provided advice to a number of my clients regarding the proposed new tax laws, but want to encourage all Canadians to make their voice heard before Monday, October 2, 2017. If the changes to our tax laws go ahead, they will have a direct, detrimental impact on Canadian business, medical access and a subsequent negative effect on our economy.

The liberal government is planning to revamp taxation exemptions for Canadian-controlled private corporations (CCPC), which means income from self employment will be taxed at the same level as those paid from salaries, leaving business owners including doctors and farmers unable to survive.

Currently, corporate business income is taxed at a lower rate than personal income to allow businesses to pay for benefits or put income into holdings or savings accounts for future needs or a rainy day. The government says this is an unfair tax advantage for business owners. What they are not considering is the liability and risk that private businesses have and the expense of benefits for both themselves and their employees. The proposed changes also impact lifetime capital gains exemptions, limiting how much a farm or small business could inherit and a families’ ability to will their farm to future generations.

While there is still much to be learned about the impact, the little we do know is negative and far reaching for Canadians.

There is still time to have your voice heard by doing each of the following three things:

Deciding when to sell is the hardest part of investing because most discussions focus on when to buy. This is not only with stocks and bonds, but currency, real estate, gold, art, and other commodities. Financial markets are constantly changing: interest rates, stock prices and currencies are always fluctuating due to competition, recessions, and down turns. For the past year we’ve discussed the logistics of being in a bond and stock market bubble.

According to Bank of America Merrill Lynch, “U.S. stocks continue trading above nearly all metrics we track…” The S&P price to earnings multiple (what you are paying for future growth) is at a 13½ year high at 17.7x, which makes it a high price for expected earnings. If you only look at the past 12 months, the market is up 13.5% and earnings are up 14%, why ch makes sense, but the longer-term picture is very different.

Over the past 8 ½ years, the S&P is up 242%, but earnings are actually below 2013, 2014, and 2015 levels, in fact there has been NO earnings growth in 10 years. To make it worse the numbers are actually adjusted for 15.4% cumulative inflation, therefore, real earnings have actually declined, while the market has increased exponentially.

Shouldn’t there be a correlation between the stock market growth and earnings? There should be, but when the Central Banks created liquidity by keeping interest rates low and providing bailouts, they provided cheap money, which led to higher asset prices as well as the highest debt levels in history for corporations, individuals and governments.

Even today, the banks are still in stimulus mode, keeping rates lower than inflation.

For investors this means you need to re-evaluate the price you’re paying for companies. There are many reasons that can change the tide, higher inflation, rise in interest rates, higher U.S. dollar, lower earnings growth forecasts, geo-political issues, decrease in auto sales and the housing market, China slows or most likely some unknown Black Swan event. Success depends on understanding why you invested in the first place and what your goals are for each investment.

Here are five strategies to help with the toughest part of investing:

1. Remember WHY you bought the asset

If your fundamental reason for the purchase was for the dividend, income, or future capital gains due to the value, and the present (price) or future expectations are not there, or less likely, then you have reached your goal and should sell. Eg. If you purchased because the investment was a low price to earnings and is now a high price to earnings, then your reason for owning the asset is no longer valid.

2. Rebalance you Portfolio

Most people only own mutual funds which are made up of stocks and bonds. True diversification is to have five non-corresponding assets including stocks, bonds, mortgages, real estate, gold, and commodities. Assuming you have 5-20% in each, and one does really well, rebalancing theory says to sell some of the asset that has outperformed and put the proceeds into the non-performing asset, thus keeping the balance in check.

3. Sell for a Better Investment

One of the greatest investors of all time, Sir John Templeton, suggests that the new investment should be at least a 50% better investment to make the change. Let me explain.

True value of asset A & B =$100

A trades at $50

B trades at $40

Difference is $10

$10/$40 = 25% not worth the trade

A trades at $50

B trades at $30

Difference is $20

$20/$30 = 66% Sell A, Buy B

4. Stop Loss

This is an order to sell a stock or a market that you have invested in at a lower price than purchased, thus limiting your loss. It can also be adjusted higher to lock in gains. Purchase at $30. Put in a stop loss order at $27 (only willing to lose 10%). If stock moves up to $40. Put in stop loss at $37 (get to ride any upside but are limiting your downside).

5. Sell because you have reached your goal

Money (investments) is simply a means to an end. It should be working for you and giving you peace of mind. These assets are useless on their own, its what you do with them that matters. Be that taking a year off, purchasing a home, or retirement. When your goals are reached it is time to sell and enjoy what you’ve earned.

Our platform at Middleretirement helps you work through each of these strategies so you are never alone with your investments. We help you take control, empowering you each step of the way. There are answers in front of you. We are here to help our clients reduce fees, avoid unnecessary risk, and understand what they own and why.

A person see’s a mirage in the desert, is it real? For that person it is, until the sought after destination is not actually there.

If you were told by investment professionals, governments, and the media that all was good, you should invest today, would you? According to most studies, yes you would. Have you ever heard an investment firm whisper the words “correction”, “loss of funds”, “investments could lose money”? Have they ever mentioned that being out of the market would make sense? Just prior to the housing bubble in the U.S. causing the economic debacle in 2008/09.

Ben Bernanke, Chairman of the Presidents Council of Economics stated that the inflated housing prices “largely reflect strong economic fundamentals”. In early 2000 Jim Cramer (CNBC) stated that the Nasdaq index (mainly technology) move was “very far from ending”.

The very month after this conference comment the Nasdaq market began its sickening drop of 80%.

Perception is based on experience, biased views, and what we hear.

Sometimes the perception may not be reality.

Consumer confidence is at a 10 year high (last time 2007).

CEO confidence highest in 6 years.

The perception amongst investors is that the market will keep going higher. Could our perception be different from reality?

Have you ever paid a premium for a service or product that’s inferior? According to the Globe and Mail; “It’s time to shed a bright light on one of Bay Street’s most annoying and well hidden practices."

The Globe and Mail is referring to Closet Indexing, or a mutual fund that closely mirrors an index fund, but charges high fees, masking itself as managed. Clients believe the fund is actively managed, meaning the Fund Manager selects specific stocks, but in reality they are just following the market and charging their investors a premium.

Unfortunately, investors have no real way to tell.

The Ontario Securities Commission (OSC) is reviewing Canadian mutual funds to determine if they are actively managed, since many studies show they UNDERPERFORM the index 75-90% of the time.

In the mean time, avoid paying eight times more for a product that has a 90% chance of underperforming. Take time today to ask your advisor about the top 10 stocks held in your RRSP, RESP or TFSA. I would guess your largest holdings are four big banks, three major oil companies and two well known utilities, translation: you are Closet Indexing.

So why not buy an index fund for .03% and save the 2.5% that you pay for this active fund?

Most Canadians are invested in Canadian mutual funds. But are they really diversified? Dividend fund, income fund, equity fund, or balanced fund, they all look the same. In Canada are largest holdings in any of these funds will be our beloved big 5 banks, and the largest oil companies. The returns of each of these funds actually differs little. Are you actually diversified with these porfolios? Could the investing sandbox actually be bigger than we are?

When ranking the 40 investible countries according to earnings vs price (how expensive it is) and dividend yield (what they pay to shareholders) Canada ranks 23rd and the United States 31st. Countries like Russia, India, Norway, China all have stocks that are less risk and pay higher dividends.

Canada represents 4% of the global economy. When we invest in only Canadian equities we miss out on the largest drivers of the past 20 years. What about Netflix, Apple, Google, hospitals, pharmaceuticals, construction companies, the cloud, artificial intelligence, for that mater almost all technology. We are missing out.

North American corporations are maturing, there is a whole new world to explore. China and India will grow in leaps and bounds over the coming 25 years, looking similar to the growth we have seen on our continent. More and more people moving to the cities, buying cars, real estate and all the growth that goes with it. Who will benefit from that growth? Those who invest in it!

To invest in the future, we need to invest where there is the most growth.

True diversification does not mean buying 5 banks and 6 oil companies, nor does it meaning owning one currency, or investing in one country. A global portfolio will hedge you from big losses in one area while giving upside in another.

We spend 12-16 years in school where we learn literature, math, geography, science all based on the primary premise that history is the best teacher. We take a job that demands following procedures from past successes, even those emergency binders in the bottom desk drawer are based on historical policies. Then we have children and try to teach them from our previous mistakes.

So why don’t we use history lessons when we invest?

History has shown us time and time again that:

1. When prices are high verses their earnings, WE ARE IN HIGH RISK

2. When there is high debt levels (leverage), THINGS USUALLY GO WRONG

3. When the majorities are complacent and ignore the signs, LOSSES OCCUR

Lets Recap:

It took almost 25 years for the stock market to recover from the 1929 crash.

It took 11 years for the stock market to recover from the 2000-2002 fall.

It took 5 years for the stock market to recover from the 2008-09 financial crisis.

What did they all have in common? Exponential growth and high debt levels.

Where are we today? Are prices expensive, debt high, are people complacent?

Maybe...just maybe, we should go back to school and dust off the history books...

Very hard to see, almost invisible, yet the damage termites can create can be very costly. Day one doesn’t hurt, neither does day 20 or 60, in fact you will never see the destruction until it’s too late.

The fees for your mutual funds are much the same.

90% of Canadian clients have their retirement money invested in mutual funds. Canadians pay among the highest fees in the developed world for these funds. But it’s not like you see them, the industry has been able to hide them. A little here, a little there. There are front end load, back end load, Segregated fund premiums, advisor fees, trailer fees, Management fees, Management expense Ratio’s, all confusing and some are hidden. You don’t write a cheque for any of the fees, it is deducted quarterly or annually from your investments, so you don’t feel the pain – until it’s too late.

According to Morningstar research (one of Canada’s most respected investment rating agencies) Canadians pay an average of 2.35% yearly for investing in these funds. That means those investments you have at the big 5 banks, investment advisory firms, or insurance companies are being deducted from your future as we speak. If you are loosing 2.35% every year to fees, you are not only loosing that money unnecessarily, but you are loosing all the growth in future years. As Einstein once said, “compound interest is the greatest force on earth”. Problem is, the investment firms know this all too well, and guess who is getting the benefit of the greatest force on earth? The investment industry.

For example: if you had $100,000 invested over 10 years, returning 5% with fees of 2.3% will earn you $29,600. You will have lost $33,880 of gains due to fees. Yes the termites have slowly eaten more of your returns than you received.

like the termites, these fees are slowly eating more of your returns than you are making on your investments.

There is a solution – REDUCE FEES. Over $1 trillion dollars have left these high cost funds and stampeded to low cost alternatives in the past 6 months. Every month you continue to pay high fees, your hard earned money is being eaten away.

Let us, at Middle Retirement coach you to reduce these fees and take control back of your hard earned money by simply understanding what you own.

Considered by some to be the most successful investor in the world, most people would not choose to bet against Warren Buffet. In 2007, he publicly offered $500,000 to any investor who could select five actively managed funds that would outperform the S&P index fund. It’s no surprise that only one person, a Fund Manager, took that bet. Today, nine years in, the funds have averaged 2.2% return while the S&P index fund averaged 7.1%. In other words, if you had followed Buffet's advice and invested in the index fund you would have gained $427,000 and paid 0.05% in fees.

If you had chosen to go with the five actively managed funds, you would only be up $110,000 and paid on average 2.42% in fees.

About 90% of all mutual funds sold in Canada are Actively managed and they underperform the market approximately 90% of the time and there is still a fee for this service. If you have a fund that returns 7% annually and you pay a 2% fee, you will lose 1/3 of your gains in 20 years.

Below is a chart showing the difference between trying to outperform on the right hand side, and letting the market do its job on the left.

The solution is to choose funds that are easily available to you and charge little to no fees, thus allowing for higher returns. By empowering yourself and staying involved with your money, you can watch your investments and retirement grow quicker through accelerated compound interest. A financial coach will help you to make these financial changes, putting your money back in your hands.

That is exactly what Goldman Sachs is recommending. In their 2017 forecast they are advising clients to be OVERWEIGHT U.S. equities. They are forecasting a 3% return for a moderate risk portfolio. To arrive at this conclusion they state “valuations don’t mater”.

I have compiled 3 points to break it all down. Let’s look at these in a little more detail.

1. Why are they recommending overweighting U.S. equities? They always do. They have to. Investment firm outlooks are part of their marketing toolbox. The majority of an investment firms earnings and bonuses come from corporate finance work. But, they need someone to buy the products – that’s you. How do I know this? I owned an investment firm. We would continue to find reasons to recommend buying even when the asset was overpriced. We needed to support our clients that paid us enormous amounts of money to do so. How could the corporate clients ever engage us if we did not publicly support them? Recommending selling is a suicide mission for investment firms.

In early 2000, months prior to a 78% drop in the Nasdaq market there were virtually NO 'sell' recommendations by the major investment firms. June 2007 (prior to the financial crisis) with the S&P500 index at 1526, Goldman Sachs, Bank of America, J.P. Morgan, A.G. Edwards, and Merrill Lynch all had targets of between 1525 and 1675. Within 24 months the index was at 676, a decline of 55%. Yes markets do lose 50 plus percent when valuations are too high.

Recommending the best performing historical asset (U.S. equities) also keeps clients calm, happy, and gives a safe feeling. These outlooks feed on human behavior – herd mentality. The investment firms have no risk in continuing to be positive, nor are they suggesting any downside potential. Recommending more reasonably valued assets in places like India, Japan, or emerging markets, although may make sense, is too risky, let alone will negatively affect their ability to receive income from their largest clients.

2. “Valuations don’t matter”, Goldman states, that because of Trump’s vision of lowering taxes while reducing regulations, earnings will catch up to stock prices. This in fact could be true if a) Trump is able to execute all that he would like to, b) it is done quickly without congress or senate issues, c) if these changes enhance global trade, and d) there are absolutely no negatives to these plans. Goldman is betting on the fact that unemployment will decrease (from a very low level), rates will not move higher (which the FED says they will), that debt will not increase (which Trump says he will), wages will increase (without affecting corporate earnings), and global demand will increase (even if he implements tougher trade deals). Could there be ANY risk in this? Remember, investment firms and their advisors are always positive (even before a 78% or 55% loss).

“Valuations don’t matter”? Really. Really?

In fact, there is nothing else that does matter when investing in assets long term other than its value. Ask Warren Buffett, “price is what you pay, value is what you get”. The cost (price) of the market or a stock is based on its current and future earnings.

The chart below is showing the long-term price to earnings. As of March 3rd we are equal to 1929. The prices that you are paying today for those company’s earnings are the second highest in history, followed only by the 1999 prior to the tech bubble and above 2008/09 crisis. Does valuation matter? It better, because that is why we invest, to benefit from higher earnings by purchasing assets at a reasonable price.

3. Goldman is suggesting you stay invested in a risk asset like stocks for a forecasted 3% return. You can get a guaranteed 2% return through a GIC and have no risk. Could stocks go down 50%? Yes. If valuations were to trade at their average multiple over the past 120 years the market would be 53% lower (not to mention global tension, interest rate increases, possible decline in real estate prices, European issues, higher debt costs, or any Black Swan event).

Since Goldman is forecasting a 3% return on a high-risk asset, and you could return 2% with no risk, you are staying in the market for a 1% premium return with a chance of a 50% loss. You should always look for positive risk/reward situations, not negative. If you have a chance to lose 50% you should be looking at a possible 100% return (positive 2:1). But today you are looking at a negative risk/reward scenario: 1% increase in return for a risk of losing 50%. That doesn’t make sense.

As your kids return home for the summer from University or as they prepare for the upcoming year, it's important to talk to them about finances.

The following article discusses some great ways to help them in their new journey with money and debt.

How to stay financially stable while you study

Everyone needs a budget. But while making it — and sticking to it — may seem daunting, the process can actually be painless. There are dozens of ways to save a few dollars each day.

Here are six solid tips to get you started.

1. Credit? Forget it

If you don’t have the cash for something, don’t buy it.

Sure, your credit card might seem like a life-saver and, yes, you might be able to put the bill out of your mind until the end of the month. But if you don’t pay it fully on its arrival, you’ll incur serious interest charges and your credit rating will suffer.

In a city like Montreal, ATMs abound, but not all are created equal. Private terminals — the ones you’ll see in stores, restaurants and bars — will charge you exorbitant fees.

Make sure to open an account with a bank that has lots of cash machines in your neighobourhood; that way, you’ll have convenient, inexpensive access to cash. It’s not worth paying as much as $5 to take $20 out, is it?

3. Letters to live by: BMW

If you own or have access to a car, you might feel tempted to drive it anywhere and everywhere. Don’t.

Considering the high costs of gas and parking, your best option is BMW — that is “bus,” “metro,” “walk.” If you really have to drive, consider carpooling. You’ll leave a smaller footprint on the environment, and you’ll save money (but real friends kick in for gas).

4. Don’t let food eat your budget

There isn’t exactly a dearth of restaurants in the city. But while you might be inclined to eat out for every meal, at the end of the month, your wallet and stomach could both be empty.

It’s cool to pick up a quick bite every now and then — just watch how much you spend on those grab-and-go eats and drinks. When it comes to preparing food on your own, take advantage of grocery store specials. Another idea might be to set up a food co-op with some friends. Buying in bulk is usually a lot cheaper.

Just remember: never, ever go shopping when you’re hungry. You’ll be amazed at the ill-advised grocery orders you can end up walking out with when you’re buying on impulse.

5. Cheap thrills

A night out with your friends doesn’t have to mean a hit to your wallet. Throw a dinner party, and share the expenses by shopping and cooking together. You may even discover new dishes that are tasty, inexpensive and healthy.

6. Hit the books, but don’t break the bank

Textbooks are one of the biggest expenses you’ll face as a student. Fortunately, most are available second-hand, which means you can save a lot of money on them.

Just check the used books section at the university or student-run co-op bookstores — the former will even let you rent your books. And unless you’ll need your old textbooks for future reference, consider selling them and putting the cash they yield toward this year’s stack.

These tips were excerpted from “Money matters,” an article originally published in the August 2013 issue of

Are you lucky? Can you become lucky? Although no one knows exactly what luck is, there are four distinct beliefs on the subject. Some believe the world is random, some have religious views that prayer will effect outcomes, some believe in astronomy, while others believe they can predict the future through palm reading, tarot cards or glass balls. Whatever you believe, the odds of being lucky can be increased by your attitude and willingness. You have the ability to be lucky!

Step 1. Increase the number of people you genuinely interact with in a positive way (Whether that’s the guy at the newsstand, neighbour, at work or at play: be interested in them, listen to them, care about them).

Step 2. Understand gut feel. Love at first sight is not a gut feel, it’s a hope (thinking you will win the lottery or a horse race is not based on any facts). When you explore an opportunity, or interact with someone your subconscious will notice more than your conscious. After a number of looks, listen to your gut. Allow time for your gut feel to develop.

Step 3. Be open to new opportunities. Be willing to spend time and explore options that may be presented to you

Step 4. Be courageous not careless. Look at the odds of success vs. failure . Do not jump in; evaluate the upside and downside. Be somewhat pessimistic when evaluating the odds, what could go wrong?Where would that put me?

Step 5. Be willing to be wrong. Be that the stock market, job choice or business decision, listen to yourself when you know it is wrong, cut your losses and get out.

If you want to be lucky with your investments, you have to follow the odds. Understand what you own, weigh the odds and you will succeed.

Do Demographics matter?

Young people create growth and inflation. They spend money, they borrow, and they grow the economy. Older people hinder growth and cause deflation. They spend less, borrow less and downsize (sell). Why were private golf courses so expensive in the 80’s and 90’s, why were tennis clubs so exclusive? The largest population in history was turning 40…peak spending years. Why have these clubs become less exclusive and less expensive? Why is the Fed keeping interest rates low to shore up the economy? Why are oil prices declining? The largest population in history is now in their 60’ and 70’s. They are spending less. What happens when there are more sellers than buyers? Prices decrease. For the first time in history a smaller generation is following a larger one. Baby boomers are selling. There is a predictable spending pattern we all adhere to.

I hope I haven't scared everyone too much with my doom and gloom regarding market predictions. Think of me as a meteorologist. I can see the storm coming and that it's going to be a big one, but I'm not sure if flooding will reach the second floor. You may have stayed home to ride out the storm in the past and that's what your friends and neighbours are doing so why not. My point is: why take the risk?

Investments in any form, from mutual funds to bonds and equities are all at risk from this storm. Currently, we are only seeing the outer bands, and yes a few days of sunshine, but my doppler is showing that the eye of this storm is yet to come.The last seven years from bottom to top saw a 100+ % return in Toronto and a 300% return in the US markets. The TSX hit a high of 15,600 in April of 2015 and is currently down by 20% sitting at 12,300. Historically, the average economic upturn is 37 months, this one was a whopping 73 months; our 2nd longest economic upturn in history.

We are seeing clear signs that the storm has begun and that the downturn is happening. This storm will not be over in a day, or a week, in fact an average downturn lasts about 18 months, we are now between 2-5 months into it. You are not too late.

If you haven't already said thank you to the market and are sitting safe and in cash, there is still time to evacuate. If you are thinking this is over, I just want to continue to caution you. You can be sitting pretty in another location, safe and worry free or you can stay on watch hoping that you will continue to get those up days or bands of sunshine. I don't want to see you waiting on the top of the roof for help to come.